EC Clean Energy Funds Outperforming Traditional Oil And Gas ETFs

It’s a tough time for the energy sector, that’s for sure. Over the past 12 full months, shares of the Energy Select Sector SPDR (NYSE Arca: XLEslid 36%.

Pulling its components from the S&P 500, XLE offers concentrated exposure to oil and gas giants such as Chevron Corp. and Exxon Mobil Corp. In fact, CVX and XOM themselves make up half of XLE’s market capitalization. As they go, so goes XLE. And they’ve gone down in the past year: a 27% swoon for CVX and a 39% dive for XOM.

It’s not just the big integrated outfits that are hurting. Pretty much every segment of the energy market has suffered over the past year: oil and gas producers off 49%, oil services outfits down 54%, and refiners 21% weaker.

But amid all the gloom, there’s a bright spot. A clean and shiny spot you might say. It’s clean energy. As bad as the oil and gas segment has sunk, clean energy has risen. And then some. Take, for example, the First Trust Nasdaq Clean Edge Green Energy Index Fund (Nasdaq: QCLN), a 42-stock portfolio of manufacturers, developers, distributors and installers in the alternative energy space.

In the past 12 full months, QCLN’s share price has appreciated 61%.

So what’s in the alternative energy space that cranks out such gains? Well, QCLN’s underlying index is broken into four sub-groups:

  • Advanced Materials — including companies producing nanotech, membranes, silicon, lithium, carbon capture and utilization as well as other materials and processes that enable clean-energy technologies;
  • Energy Intelligence — firms engaged in energy conservation and the manufacture of automated meter reading equipment, energy management systems, smart grid technologies, superconductors and power controls;
  • Energy Storage and Conversion — makers of advanced batteries, hybrid drivetrains, hydrogen and fuel cells for stationary, portable and transportation applications, and
  • Renewable Electricity Generation and Renewable Fuels — outfits supplying solar photovoltaics, those concentrating solar, wind and geothermal energy, together with manufacturers of ethanol, biodiesel and biofuel-enabling enzymes.
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Moon Kil Woong 8 months ago Contributor's comment

All forms of energy are in a well balanced portfolio although clean energies are growing as a whole component of the market. That said, any major crimp in oil supply or big jump in demand will still have the potential to cause inflation and roil the markets. This has not happened in clean energy yet.

William K. 8 months ago Member's comment

Interesting and educational